Guy Hands, the former bond trader who now owns EMI, is planning a major cull of underperforming acts as he tries to pull the record company's recorded music division out of the red.

Speaking after a meeting with staff to announce his intention to slash a third of the workforce, he also signalled an end to huge artist advances, suggesting that some acts should instead be paid salaries or a day rate while they work on their material.

He also proposed confining some bands to single track downloads over the internet rather than trying to force whole albums out of one or two hit wonders.

"We have got 14,000 artists and we cannot possibly provide a service to that number of artists, we need to be selective about who we provide that service to," he said. "It goes back to the old housewives' adage 'if a job's worth doing it's worth doing well'. We cannot be all things to all people."

He is due to meet with artists and their managers this afternoon at EMI's London headquarters but already some in the industry have raised concerns at Hands' "get tough" attitude to the company's artists.

Hands, however, said EMI will look to support some acts that it might otherwise jettison through new mechanisms such as monthly salaries or paying them a "per diem" - day rate - while they work on their material. Almost a third of acts that EMI signs never actually produce an album.

"The thing we have been trying to find is a model that will give the artists who cannot support the full functions of a label, some income," he said. "We are looking at a number of different alternatives. Once we have finalised that, we will be able to know which artists to keep and which artists frankly and unfortunately we will have to let go."

Roughly 85% of what EMI does get to release never makes a profit, in part because of the cash spent signing bands and partly due to ill-made bets on the number of CDs the market requires for particular acts. The company, for instance, is understood to have over 1m unsold copies of Robbie Williams' Rudebox album which it will send to China to be crushed. The recycled end product is used in road surfacing and street lighting.

But Hands is also looking at whether all the acts on its books should be producing albums, or whether their output would be better sold over the internet as single tracks. Radiohead, which parted company with EMI last year, recently made headlines with the digital release of its latest album In Rainbows.

Hands, who admits he bought the subsequent £40 In Rainbows box set, said the Radiohead approach to digital music delivery could be used by new bands who have a few good tracks.

"Radiohead came up with, in our view, a great idea. I am not sure that Radiohead's idea was necessarily right for major artists but that's because major artists can still sell a substantial number of CDs. But if you are a starting artist ... there is the question of can you produce a whole CD or is it really one or two tracks. If it is one of two tracks maybe digital is a better way to release it rather than spending enormous amounts of money and time trying to perfect an album to which the consumer says 'actually I only want one or two tracks'. People misunderstand just how much it costs to actually produce an album."

Hands' new approach is certainly designed to reduce the amount of cash that the label's artists get up-front. "The difference between my focus on the business and the traditional focus on the business is we are trying to balance what does the consumer want and is willing to pay for versus what does the person producing the product want," he said.

Some in the music industry believe Hands is little more than a "suit" who has scant love of music. Asked what he is currently listening to, however, he cited Lily Allen, on the recommendation of his daughter. "It takes me back to my teenage years in Kentish and south London pubs," he said.

'Like a really wonderful violin'

Hands' restructuring plans will hit EMI's recorded music division the hardest. In contrast he described its publishing arm - which acts for artists such as Amy Winehouse - as well run and "like taking a really wonderful violin and tuning it up occasionally".

The changes he plans at EMI are a long time coming, he believes. "When I first started looking at EMI back in 1995 it was clear that the change from the CD into a digital environment would need a different type of recorded music label and it should have been done years ago."

Hands has spent the last month showing his plans for EMI to some of Terra Firma's largest investors and on Friday last week they gave him their vote of confidence by investing a further $500m in the company.

As to the accusation of Radiohead frontman Thom Yorke last month that Hands has been acting like "a confused bull in china shop" at EMI, he retorted: "We definitely are not a bull in a china shop, we do know what we are doing and we know that what we are doing is trying to build a business that gets back to its former glory, that is world class and to do that we are clearly going to upset a few people but we are not in a popularity contest".

Certainly if he were to enter such a contest he would be unlikely to get many votes from some of the employees that emerged from the two staff meetings at the Odeon cinema in London's West End - Odeon also being part of the Terra Firma empire.

"We got a bottle of free water before the meeting, that's probably the last thing we'll get from Guy Hands," said one.

One member of EMI's recorded music division on leaving the meeting admitted "a serious pruning of artists is obviously going to happen" while another admitted there was quite a lot of "gallows humour" among staff although Hands' speech was "to be honest, nothing that we have not heard already".

The crowd of camera crews and reporters waiting outside the Odeon were treated to one of the local area's drunks clutching his can of lager and shouting at record executives as they emerged from their meetings. One EMI worker mumbled in response "perhaps he's going to be our next head of operations".